TDS on interest paid to Foreign Branch of Indian Bank
This query is : Resolved
22 April 2010
Whether TDS need to be made on intt. payments to foreign branch of indian banks?
More so, when intt. payment to indian banks no TDS needs to be done as per 194A.
More so, when intt. payment to indian banks no TDS needs to be done as per 194A.
22 April 2010
TDS not applicable.
22 April 2010
AS PER MY OPINION TDS NOT TO BE DEDUCTED--
As no TDS to be deducted from A banking company to which the Banking Regulation Act 1949 applies.
View of other experts solicited.
As no TDS to be deducted from A banking company to which the Banking Regulation Act 1949 applies.
View of other experts solicited.
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22 April 2010
Will such intt. payment be not covered u/s 195 since remittance to be made in foreign currency?
22 April 2010
BUT 195 IS APPLICABLE FOR NON RESIDENT AND HERE BANK IS RESIDENT.
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22 April 2010
if other experts could come in and share their views
27 July 2025
Regarding **TDS on interest paid to the foreign branch of an Indian bank**, here’s a detailed explanation based on your discussion and tax provisions:
---
### Key points:
1. **Interest paid to Indian banks (resident banks) is exempt from TDS under Section 194A(3)(iii).**
This exemption applies because Indian banks are regulated under the Banking Regulation Act, 1949.
2. **Foreign branches of Indian banks** are typically considered as **non-resident entities** for Indian tax purposes because they are located outside India.
3. **Section 195** applies to payments made to non-residents, including interest payments, requiring TDS on such payments.
---
### Analysis:
* Although the interest is being paid to a branch of an Indian bank, since the branch is **located outside India** and is treated as a **non-resident**, the exemption under Section 194A(3)(iii) **does not apply** to foreign branches.
* Therefore, the **interest payment to the foreign branch of an Indian bank is subject to TDS under Section 195**, which governs TDS on payments to non-residents.
* However, the exact TDS rate will depend on:
* The applicable **Double Taxation Avoidance Agreement (DTAA)** between India and the country where the foreign branch is located.
* Domestic law rates (Section 195 generally provides for a 10% TDS rate on interest).
---
### Summary:
| Scenario | TDS Applicability | Relevant Section |
| ---------------------------------------------- | -------------------------------- | -------------------- |
| Interest paid to Indian bank (resident) | No TDS deduction required | Section 194A(3)(iii) |
| Interest paid to foreign branch of Indian bank | TDS applicable under Section 195 | Section 195 |
---
### Additional points:
* **Compliance:** The payer should deduct TDS under Section 195 on the interest payable to the foreign branch and deposit it with the Indian tax authorities.
* **Documentation:** Form 15CA and 15CB (certificate from Chartered Accountant) may be required for foreign remittances.
---
If you want, I can help draft a summary note or assist with TDS calculation and filing procedures for this scenario. Would that be helpful?
---
### Key points:
1. **Interest paid to Indian banks (resident banks) is exempt from TDS under Section 194A(3)(iii).**
This exemption applies because Indian banks are regulated under the Banking Regulation Act, 1949.
2. **Foreign branches of Indian banks** are typically considered as **non-resident entities** for Indian tax purposes because they are located outside India.
3. **Section 195** applies to payments made to non-residents, including interest payments, requiring TDS on such payments.
---
### Analysis:
* Although the interest is being paid to a branch of an Indian bank, since the branch is **located outside India** and is treated as a **non-resident**, the exemption under Section 194A(3)(iii) **does not apply** to foreign branches.
* Therefore, the **interest payment to the foreign branch of an Indian bank is subject to TDS under Section 195**, which governs TDS on payments to non-residents.
* However, the exact TDS rate will depend on:
* The applicable **Double Taxation Avoidance Agreement (DTAA)** between India and the country where the foreign branch is located.
* Domestic law rates (Section 195 generally provides for a 10% TDS rate on interest).
---
### Summary:
| Scenario | TDS Applicability | Relevant Section |
| ---------------------------------------------- | -------------------------------- | -------------------- |
| Interest paid to Indian bank (resident) | No TDS deduction required | Section 194A(3)(iii) |
| Interest paid to foreign branch of Indian bank | TDS applicable under Section 195 | Section 195 |
---
### Additional points:
* **Compliance:** The payer should deduct TDS under Section 195 on the interest payable to the foreign branch and deposit it with the Indian tax authorities.
* **Documentation:** Form 15CA and 15CB (certificate from Chartered Accountant) may be required for foreign remittances.
---
If you want, I can help draft a summary note or assist with TDS calculation and filing procedures for this scenario. Would that be helpful?
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